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    When a foreign contractor is being paid in US Dollars, they are incurring fees from their local bank to convert the money to their currency. The contractor is losing money on each invoice. Is there anything that can be done to ensure the contractor receives full payment, will not suffer any hardship and mitigate their risks?


    Answer

    I don't have enough information to give you a specific answer. This issue should have been addressed prior to award of the contract.
     
    Losing money because of the exchange rate is not recompensable because that had to be negotiated prior to award, and generally the Government does not recognize that as an allowable expense.
     
     
    However, if it is a cost type contract, the bank fees associated with the conversion from U.S. to a local currency may be allowable under FAR 31.205-28(g) as follows: 
     
     
    31.205-28 -- Other Business Expenses.
     
     
    The following types of recurring costs are allowable:
     
    (a) Registry and transfer charges resulting from changes in ownership of securities issued by the contractor.
     
    (b) Cost of shareholders’ meetings.
     
    (c) Normal proxy solicitations.
     
    (d) Preparing and publishing reports to shareholders.
     
    (e) Preparing and submitting required reports and forms to taxing and other regulatory bodies.
     
    (f) Incidental costs of directors’ and committee meetings.
     
    (g) Other similar costs.
     
     
     
     
    If the contract was issued in Afghanistan to a local company, CENTCOM has a unique clause which should have been used in contract formation, as follows:
     
    In addition, the C-JTSCC, in paragraph 32.1110(d), also prescribes the following clause for all contracts and purchase orders executed in Afghanistan to a host nation (local) firm: 
     
     
     
    952.232-0004 
     
    PAYMENT IN LOCAL CURRENCY (AFGHANISTAN) (AUG 2011)
    (a) This contract is awarded in Afghani (local currency), if awarded to a host nation vendor. The contractor will receive payment in local currency via Electronic Funds Transfer to a local (Afghan) banking institution.
    (b) By exception, the following forms of payment are acceptable when EFT using ITS.gov is determined not available by the local finance office, in order of priority.
    (1) EFT using Limited Depository Account (LDA)
    (2) Check from the local finance office LDA
    (3) Local currency cash payments (must be approved in writing by the local finance office and contracting office prior to contract/purchase order award). Payments in cash are restricted to contracts/purchase orders when the vendor provides proof via a letter from the host nation banking institution that it is not EFT capable and validated by the local finance office that the vendor’s banking institution is not EFT capable. Cash payments will be made in Afghani.
    25.408 <http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/25.htm#P628_55648> (a)(4)) requires a specific currency, the contracting officer must determine whether solicitations to be entered into and performed outside the U.S. will require submission of offers in U.S. currency or a specified foreign currency.52.216-7 <http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/52_215.htm/t_blank#P541_96261> , Allowable Cost and Payment, in solicitations and contracts when a cost-reimbursement contract or a time-and-materials contract (other than a contract for a commercial item) is contemplated.52.232-27 <http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/52_232.htm/t_blank#P815_145122> , Prompt Payment for Construction Contracts, the contracting officer shall use the clause at 52.216-7 <http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/52_215.htm/t_blank#P541_96261> , with its Alternate I. 52.216-7 <http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/52_215.htm/t_blank#P541_96261> , Allowable Cost and Payment, and Alternate I for construction contracts and52.232-27 <http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/52_232.htm/t_blank#P815_145122> , Prompt Payment for Construction Contracts, and 52.232-27 – Payments in Support of Emergency and Contingency Operations (Deviation 2009-00011), as applicable.
     
     
     
     
     
    If the country where the foreign firm is registered is a signatory to any of the multitude of foreign trade agreements, there may be some alternatives to look at- see FAR part 25 and DFARS part 225. Because of the complexity of these issues, I suggest you get legal support to see if this situation is covered in one of the trade agreements.
     
    If the bank's fees are that exorbitant, I would also look at changing banks. There are any number of international banks that may be more reasonable.
     
    Additionally,  I note that transaction fees for using a bank's ATM  are reimbursable in the Federal Travel Regulation, chapter 301-12.1, and the FAR requires compliance with the FTR for related travel expenses. Your situation does not involve travel expenses, but I would think the principle of bank fees being reimbursable would be the same.
     
    Lastly, absent any regulatory or statutory prohibitions (I found none, but check with your legal office) the contracting officer can enter into a bilateral agreement with the contractor to recognize those costs in exchange for something of value from the company- additional warranty period, additional hours, extra reports, etc.
     
     


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